The Financial Conduct Authority (FCA), the UK’s financial regulatory body, recently shed light on both the strengths and weaknesses of companies in safeguarding consumers from authorized push payment fraud.
According to its recent findings, there’s a lot of room for improvement in the detection and mitigation fraud solutions organizations use. The FCA also found that customer outcomes are not always prioritized, which signals a need for a greater focus on consumer well-being.
“It is important that firms have both robust control frameworks and well-resourced and effective customer support in place,” the FCA noted earlier this year. “These need to evolve as fraud threats evolve. Supported by technology and the sharing of intelligence these can help firms to identify fraud and fraud risks, and so reduce fraud and its impact on consumers.”
APP Fraud is on the Rise
APP fraud is a nefarious tactic where fraudsters use social engineering to deceive victims into making a real-time payment to the fraudster’s account, usually through impersonation.
Fraudsters are having much success with this type of fraud since real-time payments are made instantly and are irrevocable, with victims having no recourse or a way to recover their funds.
According to data from Outseer, released last year, brand impersonation attacks are becoming more prevalent and made up 65% of fraud attacks in the first half of 2022. What’s more, 75% of fraudulent online banking payment activities stemmed from trusted accounts and devices.
How the UK and the U.S. Are Protecting Customers from APP Fraud
When it comes to protecting consumers from APP fraud, both the UK and the U.S. are taking the necessary steps forward.
At present, the Consumer Financial Protection Bureau (CFPB) has been a staunch supporter of consumer protection, continually warning consumers to not keep their funds in popular peer-to-peer apps such as CashApp and Venmo. Beyond issuing consumer advisories, the CFPB has been active in protecting consumer privacy and investigating, as well as taking action against companies that are involved in deceptive and unfair practices.
However, the U.S. still lacks any type of mandatory reimbursement scheme for those consumers who have fallen victim to APP fraud.
In contrast, the UK’s Payment System Regulatory just released its policy statement PS23/3: Fighting Authorised Push Payment Fraud: A New Reimbursement Requirement, which will mandate that all PSP providers reimburse customers who have fallen victim to APP fraud. Furthermore, providers will be required to pay their share of the cost, in this case 50:50, “between sending and receiving PSPs.”
With the growing threat of APP fraud, it will be interesting to see whether other countries, including the U.S. will make a similar move to protect customers and thwart the efforts of these devastating fraud schemes.